In what can only be described as a devastating blow to consumer and individual rights in this county the Supreme Court ruled Wednesday that consumers can be bound by an arbitration clause in a cell-phone deal or other contract even when state law permits a class-action lawsuit for claims arising from the deal
In a familiar 5-4 vote, the justices divided along ideological lines, with conservatives in control. Dissenting liberal justices said the ruling would make it harder for consumers with small-dollar grievances to band together and sue corporations.
The decision that federal arbitration law overrides state consumer protections drew similar divided reaction beyond the bench. Robin Conrad of the National Chamber Litigation Center praised the decision for recognizing that arbitration is "fair, fast and efficient." Deepak Gupta of Public Citizen condemned it as hurting people who seek "to hold companies accountable for fraud, discrimination or other illegal practices."
Reversing the 9th Circuit decision Wednesday, the Supreme Court said states cannot enforce such exceptions to federal law favoring arbitration provisions.
Justice Antonin Scalia, writing for the majority, noted that the Federal Arbitration Act, which bars states from discriminating against arbitration, was passed in 1925 in response to judges' "hostility" to such agreements. Scalia said the California law "stands as an obstacle to the accomplishment of the purposes and objectives to the FAA."
If a state could block an agreement because it appeared one-sided, Scalia said as he read portions of his opinion from the bench, "Nothing would stop states from declaring that all agreements for dispute resolution … are 'unconscionable'" in many circumstances.
Scalia also disputed the contention of dissenting justices that the Concepcions and others with small-dollar grievances would end up dropping them.
"The claim here was most unlikely to go unresolved," Scalia wrote. "The arbitration agreement provides that AT&T will pay claimants a minimum of $7,500 and twice their attorney's fees if they obtain an arbitration award greater than AT&T's last settlement offer."
Scalia was joined in AT&T Mobility v. Concepcion by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito.
Justice Stephen Breyer, writing for dissenters, said the majority misinterpreted the history and reach of federal arbitration law, which Breyer characterized as allowing class actions to co-exist with the 1925 act's protections for arbitration. "California's statute is consistent with, and indeed may help to further, the objectives that Congress had in mind," Breyer said.
He said that without the ability to join together in class-action lawsuits, "small-dollar claimants" could abandon their claims rather than press a case.
"I suspect that it is true even here, for as the court of appeals recognized, AT&T can avoid the $7,500 payout (the payout that supposedly makes the Concepcions' arbitration worthwhile) simply by paying the claim's face value, such that the maximum gain to a consumer for the hassle of arbitrating a $30.22 dispute is still just $30.22. What rational lawyer would have signed on to represent the Concepcions in litigation for the possibility of fees stemming from a $30.22 claims?"
Joining Breyer were Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.
